Cemetir Holding

Good afternoon. This is the Chorus Call Conference Operator. Welcome and thank you for joining the Chairman Holding Full Year 2022 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Marco Maria Bianconi, Head of MA Investor Relations of Cementir Holding. Please go ahead, sir.

Thank you. Good afternoon, good morning, and welcome to Cementir Holding Preliminary 2022 Results and Industrial Plan Update Conference Call. I'm here with Francesco Caltagirone, our Chairman and Chief Executive. Good afternoon. So I'm gonna go through 12 slides presentation which has been distributed and then I will leave the floor to any question you may have to our chairman and chief executive. Starting with the slide number three with the highlights. As you know from June 22, Turkey is considered hyperinflationary and therefore results as of December 31st, 2022 are prepared according to IAS 29 accounting principle. Revenues for the year reached a record of 1.7 billion euro, up 27% year-on-year. Excluding YAS 29, the number is up 26.5%, driven mainly by price increases. Overall, volumes were slightly down for the year, around 2.7% in cement, around 5.8% in RMC, and around 5.3% in aggregates. EBITDA again reached a record level of €335.2 million, up 7.8% year-over-year, excluding IAS 29. EBITDA was €355 million, up 14.2%, including €17.8 million of one-off positive impact. There was a higher EBITDA in main regions, namely Denmark, Belgium, Turkey, US and Egypt, and a lower EBITDA in Asia-Pacific and Sweden. EBIT reached €206.3 million, up 4.3% year-over-year, excluding ES29, was actually up 19.1%, to €235.6 million. Profit before tax reached €238.3 million, up 38.5%, excluding ES29. In fact, it would have been up 43.9%, to €247.6 million. Net cash position reached 95.5 million euros from a net debt position of 40.4 million euro as of December 31st 2021. This means that the company has generated around 136 million euro free cash flow year on year including IFRS 16 impact and 28 million euro of dividend distribution. Turning over the page to our guidance A necessary note of caution. Clearly, this guidance does not entail any COVID-19 crisis or further geopolitical tension and is given excluding IAS 29 and any extraordinary items. We expect for 2023 to reach, to actually exceed 1.8 billion euros of revenues. to reach an EBITDA in the range between €335 and €345 million, to exceed €200 million of net cash position, and a CAPEX of around €113 million. Going to the next slide, just a few highlights about our 2325 industrial plan update. On page 6, you can see that our strategy is unchanged. We keep aiming at a sustainable growth strategy to create value for all shareholders, which is based on five main pillars. One is sustainability, with 86 million euro roughly of sustainability capex over the period. We want to deliver on our carbon reduction target, which I will detail in a second. We want to keep leveraging on our state-of-the-art technology, FutureSAM, We want to push towards product and value chain circularity, and we're also exploring and implementing carbon capture technology in Denmark. The second pillar is innovation. I just mentioned future technology, but we're also launching a range of new high added value solutions to our in-wife solution platform. The third pillar is competitiveness. We want to keep improving our profitability, operational efficiency and digitalization drive that spans from lean manufacturing and logistics to e-procurement, smart maintenance and integrated digital sales. In terms of growth and positioning, we want to keep optimizing our industrial footprints. We want to keep our wide leadership on a global basis. We want to reinforce our vertical integrated platform, namely in the Nordics, in Belgium and in Turkey. We want to further develop our trading business and be selective and opportunistic in any M&A in the core business. Last but not least, people and organizations. We have implemented zero-accident policies throughout the organization. We are heavily investing in developing human capital. We have a leadership program and a talent management program and succession plan ongoing. Moving to the next couple of slides on sustainability, you can see on page seven that we keep our net zero ambition by 2050. But looking at the medium term to 2030, we have actually upgraded our targets of carbon emissions reduction. which go beyond what are the limits of the European taxonomy. The new limits, the new targets that we've planned for grey cement are 460 kg of CO2 per ton of cement, which is minus 36% from 718, and for white cement to reach 738 kg of CO2 per ton from 915, which is a 19% reduction. The previous roadmap was contemplating a 25% reduction in scope 1 and scope 2 emissions. Those targets are validated by science-based target initiatives. As far as the industrial plan, we are clearly putting a yearly reduction, CO2 reduction target by plant, and we are also embedding the targets of ESG and carbon reduction into our short-term and long-term incentive plan. Slide number eight, just to visualize the reduction targets for both gray and white cement, which I've just mentioned. You can see that this is also achieved through a reduction in clinker ratio, which you can see at the bottom of both tables. The clinker ratio goes from 82 to 64% in gray cement and from 82 to 78% in white cement. Moving to the next page of page number nine, just to highlight that this decarbonization drive, it really is implemented across the value chain of the organization, starting from raw materials where we are using more and more constantly in our production process, the use of fly ash and limestone and other cementitious products, the increase of circularity, of materials and process with recycling, which are very, very important. But also, energy is clearly a key factor in our process. We are switching to natural gas and biomass in Aalborg from 2025. We are increasing significantly the alternative fuels usage. We're pointing to district heating and green power to further lower the carbon footprint. As far as production, we are upgrading our plants. We are also reducing, as you've seen, a clean-car ratio in our cements. We are investing in clean heat consumption reduction and waste heat recovery gear. And we're also using more and more predictive maintenance. As far as logistics, which is a big part of our value chain, we're increasingly using hybrid trucks. We are also optimizing networks and routes and using e-procurement more and more. Clearly, these are on the overriding theme of the future STEM technology and the use of carbon capture technology in our organization. Going to the details and the figures on page 10, you can see here on the right-hand side the breakdown of maintenance and expansion capex year by year and also the sustainability capex. You can see that the cumulative amount we're going to spend in the year in the plan is 86 million of investment. The main initiatives are a kiln upgrade in Goran in Belgium, the introduction of natural gas in Aalborg, facility upgrades for future SEM in Aalborg, waste heat recovery in Turkey, and also alternative fuels in Izmir, and ongoing digitalization of main processes. Moving to the last couple of slides, page 11. You can see here the financial targets of our industrial plan, starting on the left-hand side from the 2022 actual results ex-YAS 29 and ex-non-recording items. You can see that the target by 2025 is to grow sales between 5% and 6% to a target of around 2 billion euros and to grow EBITDA faster by around 6% compounded. from 337 to around 400 million euro by 2025. The EBITDA margin is broadly unchanged, around 19.3%, and the average yearly capex, including sustainability capex, is around 110 million euro. The target is then to reach around 500 actually exceeds 500 million euro of net cash by the end of 2025. That means a cumulative free cash flow generation of around 400 million euro, assuming a dividend payout ratio between 20% and 25%, so a growing dividend as well. And in comparison with the previous plan on page 12, to finish my presentation, as you can see, we have a slight decline in the compounded growth rate of sales. But on the opposite side, an acceleration EBITDA growth from 5.3% to 5.9% in the new plan. And yearly capex is broadly unchanged. And clearly, there is a higher net cash position at the end of the plan. So continued significant cash generation and dependable growth trajectory. Thank you for your attention. I then turn it over to Mr. Catagirone for any questions you may have. Thank you.

good afternoon before starting the question section I would like to add something as you probably have seen we have more or less reached this year the result of our industrial plan of 2024 so with two years in advance except for the net cash position because It was, let me say, the sum of three years was slightly impossible. We have reached, anyway, a net cash position that is better nearly 50% than what forecasted for this year. We have in our plan considered, I mean, in the new plan, 23 to 25% an average cost of the CO2 of around 80 euro, and a lack, an average lack per year of around 300,000 tons. And what I can say now, from now, is that with this cash, besides a natural increase of the dividend that I expect, for example, for the 2022 should be the General Assembly, as you know, that should approve, but probably we can expect to increase nearly 20% from what we distributed on 2021. And we are starting to see, let me see, opportunity in invest the money to decrease the energy intensity of our, let me say, group of special cement in Europe and outside. As I said various times before, it is difficult today with this huge volatility of price in energy, of electricity and also in coal price. The world and also the price of CO2 and the technology that today is not proven for carbon capture to make a sort of effective acquisition policy for the medium-long term. If you consider that in 2019 our energy cost, both electricity and solid fuel, was around 190 million. And this year is expected above, well above, 400 million. You understand that probably some investment that two or three years ago weren't, let me say, affordable in terms of return on investment now becomes very interesting in this, let me say, with this point of view. And so, let's say that if we are able with our investment to decrease the energy intensity Besides the fluctuation and the volatility of the price, I think that we can expect to have a higher return on investment with less cash out. So I expect that probably, and in part, it is part of the growth of the profitability of this plan, is the fact that we can reduce probably several millions or ten of millions of our energy cost that will allow our EBITDA to increase. Another probably thing that is not written here is that also besides a very good cash performance, especially in the second part of the year, we also expect for 2022 compared to 2021 a decrease in the tax rate of nearly five points. This is due especially from a different mix of, let me say, the profit, also because last year we had some one-off and also because now it is, let me say, we think it is better fine-tuned our balance sheet. That's all, and so now I am ready, together with Marco, to answer your question. Please, go ahead.